MBA wants FHA to revise penalties in foreclosure timeline
The Mortgage Bankers Association wants the Federal Housing Administration to revise the penalty structure for mortgage servicers who fail to begin foreclosure proceedings by the federal deadline. MBA officials want the FHA to implement a "more equitable" penalty for missing the deadline to make it more attractive to service FHA loans. In a letter to David Stevens, assistant secretary for housing, and commissioner of the Department of Housing and Urban Development, the MBA said servicers are already squeezed by the six-month deadline to initiate foreclosures, which has been pared down over the years from a previous deadline of 12 months. "This change has provided HUD with significant cost savings, but has increased the risk for servicers that must now manage loss-mitigation and foreclosure timelines concurrently," according to the MBA. The association wants a maximum penalty of 30 days of interest for each month the initiation of foreclosure is delayed because of the "increased complexity of managing both the loss-mitigation and foreclosure timeframes and their competing objectives." HUD currently curtails debenture interest when a servicer doesn't begin a foreclosure within six months of default. The MBA feels the penalty is arbitrary and in need of revision. Write to Jason Philyaw.